U.S. Bank, in its latest analysis, has highlighted the potential opportunities and risks for TSMC in the wake of recent developments in Qualcomm and Intel’s acquisition dynamics. According to a report, Qualcomm has recently reached out to Intel regarding a possible acquisition, although some analysts believe this deal is unlikely to materialize. Additionally, it was reported that Apollo Global Management has proposed an investment of $5 billion into struggling chipmaker Intel.
Brad Lin and his team at U.S. Bank have emphasized that Qualcomm is one of TSMC’s top five customers, contributing 5-9% to its revenue. Currently, Intel outsources approximately 30% of its wafer production to TSMC, contributing similarly to TSMC’s revenue. If Intel’s Foundry Services (IFS) gains sufficient support and executes effectively due to this potential deal, it could slow down the outsourcing process to TSMC. A critical factor to watch is how Qualcomm would utilize IFS if it decides to sell it or integrate it into its own business. If Qualcomm chooses to sell IFS, it is likely that Intel will accelerate its outsourcing process, thereby benefiting TSMC.
Lin and his team also pointed out that Taiwan-based semiconductor company MediaTek could benefit from this potential transaction. They cited the example of Qualcomm’s Snapdragon 888 collaboration with Samsung Foundry, which faced significant performance challenges, leading to MediaTek’s (and TSMC’s) increased market share in high-end smartphone system-on-chips (SoCs). The analysts noted that TSMC’s technological leadership and execution excellence continue to provide MediaTek with a competitive edge in chip performance. If the deal leads to a change in circumstances, MediaTek could further enhance its industry position by leveraging TSMC’s strengths in foundry services.
Furthermore, Lin and his team highlighted that Qualcomm has been a key customer of TSMC, primarily using its advanced nodes. The potential acquisition of Intel could enable Qualcomm to expand into x86 and high-performance computing (HPC) markets. However, the analysts noted that Qualcomm’s existing relationships with TSMC and other foundries on different ARM architectures could complicate the integration with Intel’s x86 foundry.
The potential transaction also carries risks, including regulatory challenges that could delay or prevent the acquisition. Analysts added that these factors, combined with Intel’s weak financial condition, bring uncertainty to the semiconductor market.
Wall Street analysts have a predominantly positive outlook on the stock, with an average rating of buy.
The landscape for TSMC is thus multifaceted. On one hand, the company faces potential challenges from a shift in Qualcomm’s outsourcing strategy, which could be mitigated if Qualcomm decides to sell IFS. On the other hand, TSMC stands to gain from a strengthened relationship with Qualcomm, which could lead to increased business in advanced nodes and potentially new markets. The underlying uncertainty in the semiconductor market, driven by regulatory concerns and Intel’s financial struggles, adds to the complexity of this evolving situation.
In conclusion, TSMC’s future is closely tied to the outcome of these strategic moves in the semiconductor industry. The company must navigate both opportunities and risks to maintain its competitive edge and secure its position in the global semiconductor landscape.
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